It is to be expected, therefore, that the financial position of the company should not be secure. Operating expenses, fixed charges, and taxes absorbed 87 per cent of gross income in 1907 and 89 per cent the year before. We must not be blinded by the magnitude of the reported figures. Although $9,476,397 were carried to surplus in the year ending June 30, 1907, and $5,568,092 were paid out in dividends, these two items together comprise only about 13 per cent of gross income, and a bad year might readily see a decrease sufficient to sweep this margin away. Unlike the Union Pacific and the Northern Pacific, moreover, the Rock Island has not made consistently heavy improvement expenditures from income. Less than $40,000 was deducted by either the Frisco or the Rock Island & Pacific Railway in 1905 or in 1907; less than half a million in 1904; a little over two millions in 1903 and in 1906. And this in spite of the fact that the mileage of the Rock Island system is greater than that of any other road which this study has taken up. The fate of the company’s refunding mortgage of 1904 probably testified as much to the distrust of the Moore group of financiers and of the soundness of the property which they control as it did to the general financial uneasiness of the time. This proposition for a refunding mortgage was first framed in July, 1903. It then comprised an issue of $250,000,000 4 per cent bonds, to be used for the refunding of outstanding obligations, future enlargements and construction, purchase of bonds and stocks of other companies, and for the reimbursing of the company for advances already made. Subscriptions were sought in New York in vain. Whereas the project was to have come up at a meeting of the stockholders on October 8, the managers obtained an adjournment of this meeting until January without action, and before that month arrived announced an indefinite postponement of operations. On March 21 the stockholders voted on and approved a modified version of the original scheme, whereby $163,000,000 instead of $250,000,000 were authorized, of which $15,000,000 were to be issued at once, and $82,025,000 were to be reserved for retiring certain outstanding obligations. It proved no easier to secure subscriptions to this than to the previous plan, and in April $5,000,000 4½ per cent notes were issued instead and taken by the First National Bank of New York, which was already closely identified with the company. Not until November, 1904, after fourteen and one-half months of persistent effort, was a firm of bankers found to take the refunding issue. $25,108,000 were then sold to Speyer & Co. Mr. Speyer became a director of the Rock Island and entered the finance committee, while the proceeds of the sale went to reimburse the treasury for capital expended, and to provide for the payment of obligations maturing in 1905. Since this time other blocks of the bonds have been sold.